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A couple of recent WTO cases have revealed a rather disturbing weakness in the dispute settlement provisions. Getting the losing party to implement a panel report or Appellate Body determination can be a long and messy business.

Dispute Settlement Body determinations are supposed to be binding. If a party’s measures are found to be inconsistent with its WTO obligations, the Member must bring its practices into compliance. If they do not, the successful challenger is entitled to take

countermeasures of equivalent commercial effect. The countermeasures must be blessed by the WTO and usually take the form of suspending trade concessions or some kind of financial compensation.

While this sounds all very straightforward, it can be anything but in practice. Certain provisions of the Dispute Settlement Understanding, specifically Articles 21.5, 22 and 23, which deal respectively with disagreements over compliance measures, retaliation in cases of non- compliance and discouraging unilateral action, are ambiguous. As a result, it is unclear as to which provision applies in a situation when a challenging Member is unsatisfied with the actions, or inaction, of another Member in response to a WTO panel ruling.

In a couple of recent cases, losing parties have made minor changes to their policies, maintaining that they have complied with WTO requirements. The challenging countries have disagreed, claiming that one non-conforming measure has merely been substituted for another. Because the provisions are unclear, a Member intent on dodging an unfavourable ruling could force its adversaries into a never-ending series of panels, indefinitely delaying implementation of the original ruling.

Compliance became an issue in the American challenge of Europe’s banana import regime. After being ruled against in the bananas case, the EU showed no desire to make

meaningful changes to its practices. The Americans did not take this news calmly. Not content to wait for guidance on countermeasures from the Dispute Settlement Body, the US threatened to impose a host of trade sanctions of its own. The prospect of unilateral action by any Member, particularly a powerful country like the US, is very damaging for the multilateral trading system whose integrity depends on the coordinated action of all WTO participants. If trading partners as large as the European Union and the United States they are unable to resolve their disputes amicably, what kind of example does this set for newer and less powerful Members of the WTO?

More Transparency

In crafting the WTO’s dispute settlement provisions, negotiators bent over backwards to devise a system that is non-confrontational. Among other things, this meant limiting the hearings and other formal proceedings to official delegates representing the countries involved in the dispute. It also meant restricting the circulation of documents to only the parties involved in the dispute.

The desire was well-intended. A low-key, conciliatory approach is more likely to result in negotiated compromises than a winner-takes-all litigious model. The idea was that if one could keep the private trade lawyers out, especially the $400-per-hour, Gucci-loafer-wearing, Washington D.C. variety of trade lawyer, we would all be a lot better off.

The trouble is that all the secrecy that surrounds the proceedings gives off a bad aura. A lot of important things are being decided by WTO panels. Panel and Appellate Body reports can significantly change the way that governments conduct their business. This is true even for countries that were not involved in the disputes under consideration. It is only appropriate that non-member participants be given an opportunity to attend the proceedings and read the submissions filed.

Those opposed to the idea of more transparency raise concerns that confidential

information will be released. Unless Members are confident that proper safeguards are in place, they will not come forward with the information panels require to do their work.

The protection of truly confidential information can still be accomplished in a more open and transparent system. Canada has already taken a step in this direction by pledging to prepare non-confidential summaries of any submissions it makes to the WTO. While it has to tighten up its timing to ensure that the public version is available at the same time as the confidential brief is filed in Geneva, and before the juicy bits have already been leaked to the business press, Canada’s idea is a good one. Countries involved in disputes should have to file both confidential and non-confidential submissions. The public versions should be immediately available on the WTO website.

This idea would make things a lot easier for the WTO itself. The existing system creates all sorts of confusion and extra work. Some information is in the public domain, while other is not even though there is no real rationale for keeping it secret. WTO panels, who have to prepare public reports, have to go through the considerable effort of paraphrasing information that could otherwise have been taken directly from parties’ submissions. The result is that a lot of energy gets expended handling material that really does not need to be protected. Not only does this cost more in the end, but the illusion of secrecy does not engender confidence in the system.

The other argument against more transparency is that WTO panel and Appellate Body proceedings would turn into circuses for the disaffected. Imagine the horror going through the minds of trade bureaucrats at the thought that their sedate existence in Geneva might be disrupted by environmentalists and activists of other ilk. Its enough to make them want to put in for a transfer to the OECD.

There might be good reason to deny non-governmental organizations and others not party to a dispute the right to actually participate in the proceedings. The GATT/WTO tradition has long been one of government-to-government dealings as a way of minimizing rancour and encouraging constructive diplomacy. This does not mean, however, that non-participants should be shut out completely. In addition to being granted access to public briefs and information, they should be allowed to attend panel and Appellate Body proceedings provided confidential

information is not being discussed. Although political cultures and structures differ amongst WTO Member governments, they should consider instituting mechanisms for gathering the views of domestic groups, the so-called “civil society”. What is more, governments should make sincere attempts to reflect these opinions in their own submissions before dispute settlement bodies.

Finally, there is the issue of interim reports. In the old GATT days, first drafts of panel reports were released on a confidential basis to the countries involved in the case prior to being circulated to all Members. The idea was that the early release would provide those directly affected with an opportunity to catch and correct any mistakes made by the panel. This practice

has been carried over to the WTO, even though the job of the Appellate Body makes it redundant. After all, appellate review is supposed to clear up any errors made by the panel.

The interim report business has created no end of confusion. Some governments have not considered themselves bound by the report’s confidential status and have commented publicly on its contents. This puts other parties to the dispute in an awkward situation, not wanting to break WTO protocol but being frustrated at being put at a disadvantage in the public relations game. One common scenario is for one party to claim victory in a case upon release of the interim report. Given the complexity of these cases, it is not difficult to find at least one minor point that a panel will decide in a party’s favour. The adversary, who might well have been victorious overall, has little recourse. The interim decision is not available for members of the press to analyze for themselves. By the time the official report is released some weeks later, the press and public have lost interest. In the meantime, the folks back home are livid at their trade policy officials for having lost a case that they might really have won.

It is high time to end this messy state of affairs. WTO panel decisions should be released in public and only once. This would place all WTO Members on an equal footing and provide the transparency and openness the public deserves.

The chances are good that reforms will be made to improve the transparency of the dispute settlement system. In its July 29 position paper by WTO Ambassador Esserman, theth

United States proposed “providing for earlier circulation of panel reports, making parties’ submissions to panels public, allowing for submissions of amicus briefs and opening hearings to observers from the public”. These proposals were reportedly submitted to the Dispute Settlement Review which is supposed to report and make recommendations to the Seattle Ministerial for ratification. If we are lucky, this might be one of the early-harvest accomplishments in Seattle.